I attended the Financial Sector Conduct Authority's (FSCA) presentation of its first-ever regulatory actions report this week. It was good to see that the regulator had decided to be more transparent about its enforcement actions, and I was impressed with some of the statistics that were presented by the divisional executive for enforcement: Gerhard van Deventer.
“This report enhances the FCSA’s commitment to transparency by communicating all of the regulatory actions it has taken over the period 2022-23 financial year – including enforcement actions - in aggregated and summary format, making relevant information more readily available to stakeholders,” the opening paragraphs of the report states.
“Going forward, the FSCA will continue to annually publish its regulatory actions, to monitor developments over time. The FSCA will further develop the type and depth of information on which it will report to ensure it is meaningful and comparable. This report, therefore, serves as a baseline on which the FSCA will build in future.”
Members of the Conduct Authority even asked the media in the presentation for their input on this first try to make these efforts more palatable for the general public in future. Something that I’m already in the process of doing, I might add.
But back to the Authority’s efforts. According to van Deventer, the FSCA opened 481 new investigation cases, finalised 406 and has 329 ongoing cases. The majority of the investigation cases relate to unauthorised Financial Advisory and Intermediary Services (FAIS) and insurance business.
The FSCA further suspended the licences of 984 financial service providers (FSPs), withdrew 420 licences and debarred 210 persons from providing financial services.
“The majority of the suspensions and withdrawals relate to the non-submission of statutory returns and/or non-payment of levies; most of the debarments involved dishonest conduct. The number of suspensions constitutes approximately 8% of the total number of FSP licenses, and the number of withdrawn licences constitutes approximately 4% of the total number of FSP licences,” it said.
The FSCA also imposed R153 864 300 in administrative penalties on 44 investigated parties. Subtracting penalties that were suspended or that were set aside on reconsideration to the Financial Services Tribunal, a total of R100 644 300 administrative penalties were payable.
Most of the administrative penalties imposed relate to non-compliance with the FAIS Act. So that means it does not include Markus Jooste’s revised penalty of R20 million in line with the Tribunal’s decision on Insider Trading regarding his actions prior to his resignation as CEO from Steinhoff International. The Authority also confirmed that fact in the presentation.
What also came up in the conversation was that Jooste was a no-show on the first day of his criminal case in Germany that day. A fact that I tweeted immediately, and would like to think I was the first to do so.
So Markus Jooste didn’t show up for his court case that started in Germany today. I’m not going to have a heart attack and die from surprise by this news.
— RUAN JOOSTE (@DURITZ79) April 18, 2023
Back home, Jooste has evaded any form of the repercussion of his criminal conduct as head of the dual-listed company for close to 20 years and is still sitting pretty in his mansion in Hermanus. He used the excuse of authorities confiscating his passport for not attending the proceedings in Oldenburg.
The South African Reserve Bank (Sarb) confiscated the former CEO’s personal assets late last year, but according to media reports, the central bank has denied being in possession of his travel documents.
But despite the FSCA being an enforcement agency, it is not up to them to prosecute Jooste, or anyone else for that matter, which is the job of the National Prosecuting Authority (NPA). The NPA is actually in the process of reviewing its policies, which might empower regulators like the SARB and the FSCA to assist with such prosecutions in future. So I can only live in hope, and we shall all see how that will pan out.
What I still do find a pity is that the FSCA has been reluctant to enforce compliance by fund administrators to timeously apply to a court for the reinstatement of registrations cancelled many years ago.
Last week, the high court in Pretoria set aside the cancellations of the registrations of another 114 or so pension funds, some of which were funds the regulator knew way back in 2014 should not have been cancelled. So Liberty is doing the right thing but taking its time about it. The same goes for Alexander Forbes and Momentum, which asked for the cancellations of the registrations of funds when they shouldn't and have seemed to be sitting on their hands without consequence.
Divisional Executive of Retirement Funds Supervision Olano Makhubela reminded Personal Finance of the Authority Cancelations Report it released at the end of March. He said the effort was “literally initiated” to clean up the database and give the public a better understanding of the history behind it and what has been done to rectify the situation up to now.
The project was the subject of litigation from 2015 to 2018, amid allegations of irregularities and corruption on the part of the retirement funds industry and officials of what was, before April 2018, called the Financial Services Board (FSB).
The FSB’s deputy registrar of pension funds at the time, Rosemary Hunter, took her case against the FSB all the way to the Constitutional Court. She sought to compel the regulator to conduct a thorough investigation into the cancelled funds. The Constitutional Court ruled against her in the latter part of 2018.
The FSB commissioned three independent investigations into the Cancellations Project between 2014-2016, but this was never released to the public.
“Given the enormity of the Cancellations Project, mistakes were inevitable but not systemic, and where they were uncovered, they were rectified,” the FSCA said in the report.
Makhubela also told Personal Finance that it was not a widespread issue, mostly confined to Liberty, and that, in fact, the courts recently ordered the administrator to reinstate the last batch of previously de-registered retirement funds. “This would bring an end to that matter,” he said.
It is important to remember that the FSCA can’t force these reinstatements, and it can only be initiated by a court of law, but Makhubela said that authorities had made decent progress with that.
PERSONAL FINANCE